It\’s not just bitcoin companies; money transmitters in general are being hit with stricter regulations.

AFP/Getty Images

Western Union has raised estimates for compliance-related costs in 2014 because of the regulatory environment.

That was evident in Western Union\’s
third-quarter earnings after the bell Tuesday, in which it forecast higher compliance-related expenses in 2014 due to the regulatory environment. It seems like investors honed in on the increased compliance costs, sending shares plummeting 12% on Wednesday, the biggest decline on the S&P 500
.

From the earnings release (emphasis added):

\”The financial services industry, including money services businesses, continues to be subject to increasingly strict legal and regulatory requirements. Western Union works with various regulators around the world on evolving requirements for customer, transaction, and agent risk assessment, control, and reporting, and conducts ongoing reviews of its own programs. While the Company has increased its investments in compliance considerably in recent years, significant additional investment in 2014 is now anticipated in light of the current environment and our internal reviews of the increasingly complex and demanding global regulatory requirements.\”

Western Union, the largest money transmitter, said it estimates compliance-related costs to rise to about 3.5% to 4.5% of 2014 revenue from 2.5% of revenue this year. And those rising costs are likely eliminate growth in operating profit in 2014, the company added.

Several bitcoin companies came under regulatory scrutiny earlier this year for failing to register as money transmitters in the U.S., including the popular Japan-based bitcoin exchange Mt. Gox. The take down of digital currency exchange Liberty Reserve in May, which raised questions about the future of virtual currencies like bitcoin, included a charge of operating as a money transmitter without a license.

Story Conversation

About The Tell

The Tell is MarketWatch’s fast and engaging look at trends and themes in the day’s markets. Drawing on our reporters, analysts and commentators around the world, as well as selecting the best of the rest online, The Tell is all about the pulse of the markets through news, insight and strategic information to help you make the best investing decisions. Got a tip? Tell us at TheTell@MarketWatch.com